The market continues to move sideways, at least in the intermediate term, as investors can’t seem to get past the usual suspects of an unpleasant election, an uncertain Fed and a mix of Brexit, Deutsche Bank and other ongoing dramas. The S&P 500 is trading right about where it was in the middle of July, as is the Dow. The Nasdaq is stronger, which indicates that growth stocks are still providing some leadership.
The longer-term trend is still up and the S&P continues to hold its recovery gains from its September 9 slip. Those two factors lead us to think that the next major move may be up, but that’s not a prediction we’d care to base any investment on. The markets remain reactive to the flow of daily news, which makes for choppy trading. A move up or down wouldn’t surprise us either way.
We will maintain our mildly positive stance (level 7 out of 10 on the Market Monitor). That’s a “leaning bullish” reading, but also indicates that it’s wise to hold some cash until the market makes a decisive move.
Hold the strong stocks that are working for you, but take extra care with buying decisions. Waiting for proper setups and buyable pullbacks can give you a little extra margin of safety.
Buy Ideas
Arista Networks (ANET 86) has been in an uptrend since late June, and got a high-volume bump on September 14. It’s been trading sideways since September 22, tightening up a little on calm volume. It’s buyable here with a stop at its rising 25-day moving average, now at 80.
Match Group (MTCH 17)
has been on a roller coaster since the market turned up in February, but it keeps going higher. The stock is digesting a high-volume breakout in late September and has pulled back to near its July/August resistance. A buy near 17 offers a good risk/reward profile, with a fairly loose stop at 16, given its volatility.
We want to reiterate our positive recommendation on Parsley Energy (PE 35), which survived the shakeout in energy stocks in late September. Parsley’s rebound has been solid, and it’s sitting right at its 35 breakout price. We continue to think that a half position in PE looks solid, as long as the market stays calm.
Thor Industries (THO 85)
staged a three-day shakeout in early September, dipping to its 25-day moving average before bouncing back energetically. THO broke out to new highs on September 27 and has been trading sideways since then. A pullback to the bottom of its recent range at 85 looks like a good buy, with a stop at 79 for safety.
Sell Ideas
We have three sells this week. Communications Sales & Leasing (CSAL 28) and LGI Homes (LGIH 35) have tagged their defensive stops and Dexcom (DXCM 83) has followed through to the down side on its September 28 free-fall. All should also be sold.
Suggested Stops
Acacia Communications (ACIA 104) near 98
Burlington Stores (BURL 82) near 78
Cirrus Logic (CRUS 54) near 48
Copa Holdings (CPA 84) near 79
Electronic Arts (EA 85) near 81
Green Plains Energy (GPRE 28) near 23.5
Line Corp. (LN 48) near 43.5
Masimo (MASI 60) near 56
Microchip Tech. (MCHP 62) near 59
NetEase (NTES 253) near 218
NuVasive (NUVA 67) near 63.5
Nvidia (NVDA 67) near 61
Parsley Energy (PE 35) near 30.5
Penumbra (PEN 74) near 69.5
Proofpoint (PFPT 73) near 72
Rice Energy (RICE 27) near 23.5
Tata Motors (TTM 42) near 38.5
Thor Industries (THO 85) near 79
TransDigm (TDG 280) near 279.5
Trex (TREX 60) near 56.5
Twilio (TWLO 62) near 53
Urban Outfitters (URBN 37) near 33.5
XPO Logistics (XPO 37) near 33
Wix.com (WIX 44) near 39.5
Wynn Resorts (WYNN 97) near 94
Zendesk (ZEN 30) near 29